Becker: How the GST threshold on overseas purchases can be lowered to one cent

17 May 2013 Books+Publishing

Australian Booksellers Association (ABA) CEO Joel Becker has written a blog post on the Council of Small Business Australia website calling for Australian leaders to ‘show some gumption’ and close the GST ‘loophole’.

In December 2012, the Federal Government gave ‘in principle’ support for lowering the current low value threshold for collecting GST on goods purchased from overseas suppliers, as recommended by the government’s Low Value Parcel Processing Taskforce. However, there has been no further response from the government in relation to moving the current level of the threshold, which stands at $1000.

Becker writes:

‘On an almost daily basis, we read yet another story about the dramatic fall in GST revenue, and its negative impact on the economy. A factor frequently referred to is that consumers are increasing their purchasing from overseas online retailers. Yet we hear so little that presents viable solutions.

‘It is estimated that approximately two to three billion dollars per annum (and growing) in GST revenue is being lost. This loss of revenue is consistently mentioned as a key factor in the so-called “black hole” (now estimated at more than $17 billion) in the budget.

‘Current regulations are that any purchase of more than $1000 from an overseas online retailer has a 10% GST impost, collected through Customs. For the last several years various government departments have been paying for reviews into possibly changing the threshold to figures like $200 or $400 or $500, and weighing that against the cost of collection by customs. It keeps winding up in the too-hard basket, and nothing has been done.

‘The reality is that the threshold can be changed to one cent! All but an infinitesimal amount of purchasing of online goods is done through the large credit card companies—Visa, MasterCard, and American Express.

‘People talk about an “inevitable” increase in the GST, or yet another (albeit worthy) levy, but let’s look at where revenue can be retrieved. The solution is as simple as automatically adding 10% to the amount of any purchase. You buy a camera lens for $400 and $40 is added to the purchase. All it takes is a program change in the payment gateway’s software. The credit card company then remits it to the Australian Taxation Office (ATO).

‘Before we start listening to the bleating from the banking and credit card sector about the costs and difficulties of implementing the collection of GST, perhaps we need to be reminded of the hundreds of thousands of small, medium and large businesses that are currently tax collection agents for the ATO through the collection of the GST, with no compensation. Frankly if it costs them five or ten or twenty million dollars to implement this, and they can’t afford it from their existing profits, then I’m all for the government subsidising the software costs—after all, if the return on that small investment is two or three billion dollars a year, it is money well spent!

‘So, if the solution is so simple, why hasn’t it happened? State governments, particularly NSW, who are feeling the pinch from the fall in GST revenue, have become increasingly vocal about this issue. It is frequently suggested that both Government and Opposition are terrified that it might be perceived as a new tax, and in the current volatile political environment, both the major parties are reticent to close this loophole.

‘And a loophole is just what this is. As an unintended consequence of changes in consumer buying habits, people are not paying taxes on things that they have done for years.

‘At a time when tax fairness legislation is going through the US Congress to combat interstate businesses not paying their fair share of sales tax; when the French and the Eurozone have passed legislation to ensure that VAT is paid based on where the purchaser is, rather than what tax haven the online supplier lists as their headquarters, it is time to fix this problem.

‘It is time for our leaders to show some gumption.

‘I manage an industry association whose members—booksellers—are impacted by overseas purchasing. I am also a realist. Consumers will continue to buy from overseas – for convenience, for price, for availability—but as a good corporate citizen with children in the school system, who uses the health system, who drives on the roads, I know that it essential that our tax base not be eroded, and am confident that the Australian public, however they buy their goods, will continue to want to pay their fair share of taxes—no more, no less.’

Category: Local news